SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant toss.240.14a-11(c) orss.240.14a-12
AVALON CAPITAL, INC.
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Name of Registrant as Specified In Its Charter
N/A
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Name of Person(s) Filing Proxy Statement if other than the Registrant
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
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4) Proposed maximum aggregate value of transaction:
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(i)
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which such offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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(ii)
<PAGE>
AVALON CAPITAL, INC.
34 Chambers Street
Princeton, New Jersey 08542
December 4, 2000
Dear Shareholder:
We are pleased to enclose the Notice and Proxy Statement for the
Annual Meeting of Shareholders of Avalon Capital, Inc. (the "Fund"), to be held
at 10:00 a.m. (E.S.T.) on Monday, January 29, 2001 at the Equinox Hotel, 3567
Main Street, Manchester Village, Vermont 05254.
Please take the time to read the Proxy Statement and cast your vote,
since it covers matters that are important to the Fund and to you as a
shareholder. At the Annual Meeting, Fund shareholders will be asked to consider
and vote on the following proposals:
1. To elect two (2) Directors to serve until their successors are
elected and qualified.
2. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Fund.
3. To transact such other business as may properly come before the
Annual Meeting of Shareholders or any adjournments thereof.
The Directors of the Fund have concluded that the proposals are in
the best interests of the Fund and its shareholders and recommend that you vote
FOR each of the proposals, which are described in more detail in the enclosed
Proxy Statement.
We appreciate your participation and prompt response in this matter
and thank you for your continued support.
Very truly yours,
/s/ Daniel E. Hutner
Daniel E. Hutner
Chief Executive Officer and President
<PAGE>
AVALON CAPITAL, INC.
34 Chambers Street
Princeton, New Jersey 08542
(609) 683-3916
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 29, 2001
TO THE SHAREHOLDERS OF AVALON CAPITAL, INC.:
NOTICE IS HEREBY GIVEN, that the Annual Meeting of Shareholders (the
"Meeting") of AVALON CAPITAL, INC. (the "Fund"), a registered investment
company, will be held on January 29, 2001 at 10:00 a.m. (E.S.T.), at the Equinox
Hotel, 3567 Main Street, Manchester Village, Vermont 05254 for the following
purposes:
1. To elect two (2) Directors to serve until their successors are
elected and qualified.
2. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Fund.
3. To transact such other business as may properly come before the
Annual Meeting of Shareholders or any adjournments thereof.
The close of business on November 30, 2000 has been fixed as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting and at any adjournment thereof.
YOUR ATTENTION IS CALLED TO THE ACCOMPANYING PROXY STATEMENT AND
PROXY CARD. SHAREHOLDERS ARE ENCOURAGED TO CAREFULLY READ THE PROXY STATEMENT
AND VOTE PROMPTLY BY EXECUTING AND RETURNING THE PROXY CARD IN THE ENCLOSED
ENVELOPE. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
ANNUAL MEETING. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY
THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO THE FUND AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY
VOTING IN PERSON AT THE MEETING.
By Order of the Board of Directors
Michele Scheddin, Secretary
December 4, 2000
<PAGE>
AVALON CAPITAL, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 29, 2001
This Proxy Statement is furnished by and on behalf of the Board of
Directors of Avalon Capital, Inc. (the "Fund") in connection with the Fund's
solicitation of voting instructions for use at the Annual Meeting of
Shareholders of the Fund, or any adjournment thereof (the "Meeting") to be held
on January 29, 2001 at 10:00 a.m., (E.S.T.), at the Equinox Hotel, 3567 Main
Street, Manchester Village, Vermont 05254, for the purposes set forth below and
in the accompanying Notice of Annual Meeting. At the Meeting, the shareholders
of the Fund will be asked:
1. To elect two (2) Directors to serve until their successors are
elected and qualified.
2. To ratify the selection of Deloitte & Touche LLP as independent
auditors for the Fund.
3. To transact such other business as may properly come before the
Annual Meeting of Shareholders or any adjournments thereof.
The election of the nominees for Director and the ratification of the
selection of independent auditors require the affirmative vote of a simple
majority of shares represented at the Meeting either in person or by proxy,
assuming a quorum is present. Solicitation of proxies is being made primarily by
the mailing of this Notice and Proxy Statement with its enclosures on or about
December 4, 2000. Shareholders of the Fund whose shares of common stock are held
by nominees, such as brokers, can vote their proxies by contacting their
respective nominee. In addition to the solicitation of proxies by mail, officers
of the Fund and employees of Hutner Capital Management, Inc. ("Hutner Capital"
or the "Adviser"), without additional compensation, may solicit proxies in
person or by telephone, telegraph, facsimile, or oral communication. The Fund
will pay the cost of holding the Meeting, including the cost of printing and
mailing the Proxy Statement and Proxy Card, tabulating votes cast, and any
out-of-pocket expenses incurred with respect to the Meeting.
The Fund issues only one class of common stock ("Common Stock").
Shareholders of the Fund at the close of business on November 30, 2000 (the
"Record Date") will be entitled to be present and give voting instructions for
the Fund at the Meeting with respect to their shares of Common Stock owned as of
such Record Date. Shareholders will be entitled to one (1) vote for each full
share, and a partial vote for each partial share of the Fund that they own on
the Record Date on each matter. As of the Record Date, there were 829,483 shares
of Common Stock outstanding and entitled to vote, representing total net assets
of approximately $15,300,458.
A shareholder may revoke the accompanying proxy at any time prior to
its use by delivering to the Secretary of the Fund a written revocation or duly
executed proxy bearing a later date. In addition, any shareholder who attends
the Meeting in person may vote by ballot at the Meeting, thereby canceling any
proxy previously given.
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<PAGE>
The persons named in the accompanying proxy will vote as directed by
the proxy, but in the absence of voting directions in any proxy that is signed
and returned, they intend to vote FOR each of the proposals and may vote in
their discretion with respect to other matters not now known to the Directors of
the Fund that may be presented at the Meeting.
A majority of the outstanding shares of the Fund on the Record Date,
represented in person or by proxy, must be present to constitute a quorum for
the transaction of the Fund's business at the Meeting. If a quorum is not
present at the Meeting, or if a quorum is present but sufficient votes to
approve any or all of the Proposals are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the Proposals that are the
subject of the Meeting, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy. A shareholder
vote may be taken on one or more of the Proposals in this proxy statement prior
to any adjournment if sufficient votes have been received with respect to a
Proposal. If a shareholder abstains from voting as to any matter, then the
shares held by such shareholder shall be deemed present at the Meeting of the
Fund for purposes of determining a quorum, but shall not be deemed represented
at the Meeting for purposes of calculating the vote with respect to such matter.
If a broker returns a "non-vote" proxy, indicating a lack of authority to vote
on a matter, then the shares covered by such non-vote shall be deemed present at
the Meeting for purposes of determining a quorum, but shall not be deemed
represented at the Meeting for purposes of calculating the vote with respect to
such matter.
INVESTMENT ADVISER
Hutner Capital Management, Inc., the Adviser, is a registered
investment adviser with the Securities and Exchange Commission. The Adviser was
initially incorporated in the State of New York on February 7, 1995 and was
reincorporated in New Jersey in 1996. Hutner Capital manages private accounts
for individuals, trusts, estates, institutions and pension and profit-sharing
plans totaling approximately $60 million. Hutner Capital has offices in
Manchester, Vermont as well as at 34 Chambers Street, Princeton, New Jersey
08542. Daniel Hutner is the sole stockholder of Hutner Capital and serves as the
Chairman of the Board and President. Mr. Hutner also serves as the General
Partner of each of Avalon Partners, L.P. and Hutner Special Situations Fund,
L.P. In addition, Mr. Hutner is the managing member of Hutner Capital
Management, L.L.C., which serves as the General Partner of Hutner High Income
Fund, L.P.
Pursuant to the Advisory Agreement, Hutner Capital provides to the
Fund investment management and financial advisory services, including causing
the purchase and sale of securities in the Fund's portfolio, subject at all
times to the policies set forth by the Board of Directors. Under the terms of
the Advisory Agreement, Hutner Capital supervises all aspects of the Fund's
investment operations.
OWNERSHIP OF SHARES
The following three (3) shareholders were known by the Fund to own of
record more than five (5%) percent of the outstanding shares of the Fund as of
November 30, 2000: William Endicott, 44,343 shares (5.3%); Ann Keiser, 55,084
shares (6.6%); and Winifred Thomas, 119,875 shares (14.5%).
The address for Ms. Keiser and Ms. Thomas is c/o Hutner Capital
Management, Inc., 34 Chambers Street, Princeton, New Jersey 08542,
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<PAGE>
PROPOSAL 1 -TO ELECT TWO DIRECTORS TO SERVE UNTIL THEIR SUCCESSORS ARE
ELECTED AND QUALIFIED
At the Meeting, two Directors will be elected to serve as Directors
of the Fund, each to serve until their successors are duly elected and
qualified. There are currently five Directors sitting on the Board of Directors
of the Fund, having been elected since 1995. The Fund has provisions in its
Articles of Incorporation (the "Articles") and By-Laws that have the effect of
limiting the ability of other entities or persons to acquire control of the
Fund. Section (2) of Article VI of the Articles provides that the Board of
Directors is to consist of three classes of directors, Class I, Class II and
Class III, one class to be elected each year. At each annual meeting of
shareholders, the term of one class will expire and directors will be elected to
serve in that class for three (3) years. Thus, during a three year cycle, two
directors will be elected in the first year, another two directors will be
elected in the second year and one director will be elected in the third year.
This provision makes it more difficult for a third party to obtain control of
the Fund by delaying the replacement of a majority of the Board of Directors. A
director may be removed from office only by a vote of the holders of
seventy-five (75%) percent of the shares of the Fund entitled to be voted on the
matter. Class I, II and III currently consist of the following Directors:
Class I: William Endicott and Edward Rosen
Class II: Daniel E. Hutner and Donald Smith
Class III: Nancy W. Hutner
ONLY THE DIRECTORS IN CLASS II ARE HEREWITH BEING SUBMITTED TO THE
SHAREHOLDERS OF THE FUND AS NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Both of the nominees in Class II, DANIEL E. HUTNER and DONALD SMITH,
are currently Directors and were elected to the Board of Directors by the sole
shareholder of the Fund in 1995. Each nominee has consented to serve as a
Director, if elected; however, should any nominee become unavailable to accept
election, an event not now anticipated, the persons named in the proxy will vote
in their discretion for another person or persons who may be then nominated as
Director.
The members of the Board of Directors, including the nominees, are
set forth in the following table. The table also sets forth information about
each of them individually, concerning age, address, principal occupation,
business experience for at least the last five (5) years, and ownership of
shares in the Fund. Mr. Hutner, a nominee for Director, is an "interested
person" of the Fund as defined in the Investment Company Act of 1940
("Interested Directors").
-3-
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OF THE FUND
----------------------------------- --------------------------------------------------- -------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED AND
PRINCIPAL OCCUPATION AND OTHER PERCENT OF CLASS
NAME (AGE) AND ADDRESS BUSINESS EXPERIENCE DURING THE AS OF NOVEMBER 30, 2000
PAST FIVE (5) YEARS
----------------------------------- --------------------------------------------------- -------------------------------------------
<S> <C> <C>
WILLIAM ENDICOTT (55) Director of the Fund; Director of the NAIC Growth 44,343 shares (5.3%)
Bethesda, MD 20816 Fund, Inc., 1995 to 1997; Member of the White
House staff since 1999; Senior Advisor,
U.S. Small Business Administration, 1997
to 1999; Democratic National Committee,
1995 to 1997, U.S. Olympic Coach 1977 to
1992; staff, U.S. House of
Representatives, 1970 to 1982; U.S.
Marine Corps Reserve, 1973 to 1982.
----------------------------------- --------------------------------------------------- -------------------------------------------
EDWARD ROSEN (49) Director of the Fund; President, Star Children's 15,360 shares (1.9%)
Star Children's Dress Co. Dress Company, Inc. since 1985; Vice-President
100 West 33rd Street 1983 to 1985.
New York, NY 10001
----------------------------------- --------------------------------------------------- -------------------------------------------
*DANIEL E. HUTNER** (51) Chairman of the Board of Directors, Chief 101,360 shares (12.2%)
Hutner Capital Management, Inc. Executive Officer and President of the Fund;
109 West Union Street President, Hutner Capital Management since
Box 379 February 1995; Consultant, National Association
Manchester Village, VT 05254 of Investors Corp. 1995 to 1997; President,
Pulsifer and Hutner, Inc., 1990 to 1996; General
Partner, Avalon Partners, L.P. since 1990;
General Partner, Hutner Special Situations Fund
since 1994; Managing Member of Hutner Capital
Management, L.LC., the General Partner of Hutner
High Income Fund, L.P.
----------------------------------- --------------------------------------------------- -------------------------------------------
-4-
<PAGE>
----------------------------------- --------------------------------------------------- -------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED AND
PRINCIPAL OCCUPATION AND OTHER PERCENT OF CLASS
NAME (AGE) AND ADDRESS BUSINESS EXPERIENCE DURING THE AS OF NOVEMBER 30, 2000
PAST FIVE (5) YEARS
----------------------------------- --------------------------------------------------- -------------------------------------------
*NANCY W. HUTNER (46) Director of the Fund; Vice President and 3 shares (0%)
Hutner Capital Management, Inc. Treasurer of the Fund; Administrator, Avalon
109 West Union Street Partners, L.P. 1990 to 1999; Vice President,
Box 379 Hutner Capital Management 1995 to 1999;
Manchester Village, VT Consultant, Pulsifer and Hutner, Inc. 1983 to
05254 1996; Assistant to Director, Development
Administration, Princeton University,
1980 to 1983; Researcher, National
Geographic Society, 1976 to 1980.
----------------------------------- --------------------------------------------------- -------------------------------------------
DONALD SMITH** (56) Director of the Fund; Director of Questar Funds, 7,207 shares (0%)
Don Smith Realty, Inc. Inc. since 1999; Real Estate Broker, Gilsenan &
6 North Bayard Lane Company Realtors since 2000.
Mahwah, NJ 07430
----------------------------------- --------------------------------------------------- -------------------------------------------
MICHELE SCHEDDIN (32) Vice President and Secretary of the Fund; Vice 104 shares (0%)
Hutner Capital Manage- ment, Inc. President, Hutner Capital Management since 1996;
34 Chambers Street Assistant Portfolio Manager, Pulsifer and Hutner,
Princeton, NJ 08542 Incorporated, 1989-1996.
----------------------------------- --------------------------------------------------- -------------------------------------------
<FN>
* "Interested" Director
** Nominee for Director
</FN>
</TABLE>
As of November 30, 2000, each of the Directors and Officers of the Fund
owned the number of shares shown in the above table and, as a group owned
beneficially 20.3% of the Fund's outstanding shares.
During the Fund's fiscal year ended August 31, 2000, the Board held five
(5) Board of Directors meetings and two (2) Audit Committee meetings. Each of
the Directors attended at least seventy-five (75%) percent of the total meetings
held during such fiscal year.
-5-
<PAGE>
COMMITTEES
The Board has an Audit Committee which has met with Fund management
to discuss, among other things, the Fund's audited financial statements for the
year ended August 31, 2000. The Audit Committee has also met with the Fund's
independent accountants and discussed with them certain matters required under
SAS 61 including, but not limited to, the scope of the Fund's audit, the Fund's
financial statements and the Fund's accounting controls. The Audit Committee has
received the written disclosures and the letter from the Fund's independent
accountants required by Independence Standards Board Standard No. 1, as may be
modified or supplemented from time to time, and has discussed with the
independent accountants, their independence. Based upon these reviews and
discussions, the Audit Committee has recommended to the Board of Directors that
the Fund's audited financial statements be included in the Fund's 2000 Annual
Report to Shareholders for the year ended August 31, 2000 and be mailed to
shareholders and filed with the Securities and Exchange Commission. The Audit
Committee also adopted a written charter in October of 2000, a copy of which is
attached hereto as Appendix A. The Audit Committee currently consists of all of
the Independent Directors (William Endicott, Edward Rosen and Donald Smith).
During 2000, the Audit Committee met twice. Each of the Independent Directors
attended all of the Audit Committee meetings held. The Fund's Audit Committee
will serve as the Nominating or Compensation committee to the extent necessary.
REMUNERATION OF BOARD MEMBERS AND OFFICERS
The Fund pays each Director who is not an "interested person" as
defined in the Investment Company Act of 1940, an annual fee of $1,000, together
with such Director's actual out-of-pocket expenses related to attendance at such
meetings. The Fund does not compensate "interested persons" who serve on the
Board of Directors. For the year ending August 31, 2000 and thereafter, each of
the Fund's independent directors will receive a director's fee of $1,000.
Independent Directors will also continue to be reimbursed for any travel or
other expenses incurred for such attendance. The officers of the Fund are not
paid compensation by the Fund for their work as officers, and no fees are paid
to interested Directors for the performance of their duties.
For the fiscal year ended August 31, 2000, the Directors listed below
received the following compensation:
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<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 2000
COMPENSATION TABLE
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
(1) (2) (3) (4) (5)
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
Pension or Retirement Total Compensation From
Benefits Accrued As Fund and Fund Complex
Aggregate Part of Fund Expenses Estimated Annual Paid to Directors**
Name of Person, Position Compensation From Fund Benefits Upon Retirement
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
<S> <C> <C> <C> <C>
DANIEL E. HUTNER* None None None None
Director
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
NANCY W. HUTNER* None None None None
Director
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
WILLIAM ENDICOTT $1,000 None None $1,000
Director
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
EDWARD ROSEN $1,000 None None $1,000
Director
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
DONALD SMITH $1,000 None None $1,000
Director
------------------------------- ----------------------- ----------------------- -------------------------- ------------------------
<FN>
* Interested Directors
** The Fund is the only fund in the Fund Complex. The executive
officers of the Fund are: Daniel E. Hutner, Nancy W. Hutner
and Michele Scheddin.
</FN>
</TABLE>
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote of the holders of a simple majority of the
shares of the Fund represented at the meeting, assuming a quorum is present, is
required to approve the election of the nominees of Class II
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS
THAT SHAREHOLDERS OF THE FUND VOTE FOR THE ELECTION OF THE NOMINEES
PROPOSAL 2. TO RATIFY THE SELECTION OF INDEPENDENT AUDITORS
At a meeting of the Board held on October 3, 2000, the Board,
including a majority of Directors who are not "interested persons" as defined in
the 1940 Act, as well as the Directors who were members of the Audit Committee,
selected the accounting firm of Deloitte & Touche LLP to act as the independent
auditors of the Fund for the fiscal year ending August 31, 2001.
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<PAGE>
Deloitte & Touche LLP has served as independent auditors for the Fund
with respect to its financial statements since the inception of the Fund in
1995. Based upon a recommendation from the Adviser, the Directors deemed it
appropriate at the organizational meeting to select Deloitte & Touche LLP as
independent auditors. The Board selected Deloitte & Touche LLP after considering
that firm's experience as independent auditors to various investment companies
throughout the United States.
Since the Fund's inception in 1995, there have been no disagreements
with Deloitte & Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of that firm, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.
Deloitte & Touche LLP are independent auditors and have no direct
financial or material indirect financial interest in the Fund. Representatives
of Deloitte & Touche LLP are not expected to be at the Meeting but have been
given the opportunity to make a statement if they wish, and will be available
should any matter arise requiring their presence.
The Board's selection is submitted to the shareholders for
ratification.
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote of the holders of a simple majority of the
shares of the Fund represented at the meeting, assuming a quorum is present, is
required for the ratification of the selection of independent auditors.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF
THE FUND RATIFY THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
FOR THE FUND FOR THE YEAR ENDING AUGUST 31, 2001.
OTHER MATTERS TO COME BEFORE THE MEETING
The Fund's management does not know of any matters to be presented at
the Meeting other than those described in this Proxy Statement. If other
business should properly come before the Meeting, the proxy holders will vote
thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Stockholders wishing to submit proposals for inclusion in a Proxy
Statement for a subsequent stockholders' meeting should send their written
proposals addressed to the Secretary of the Fund at 34 Chambers Street,
Princeton, New Jersey 08542. Proposals must be received at a reasonable time
prior to the date of a meeting of stockholders to be considered for inclusion in
the materials for the Fund's meeting. Timely submission of a proposal does not,
however, necessarily mean that such proposal will be included.
-8-
<PAGE>
REPORTS TO SHAREHOLDERS
The Fund will furnish, without charge, a copy of the Annual Report
and the most recent Semi-Annual Report regarding the Fund on request. Requests
for such reports should be directed to American Data Services, Inc., the Fund's
Administrator, at (631) 951-0500.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
U.S. securities laws require that the Fund's shareholders owning more
than 10% of outstanding shares, Directors, and officers, as well as affiliated
persons of the Fund's Adviser, report their ownership of the Fund's shares and
any changes in that ownership. During the calendar year ended December 31, 1999,
the filing dates for these reports were met. In making this disclosure, the Fund
has relied on the written representations of the persons affected and copies of
their relevant findings.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY CARD IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
Michele Scheddin, Secretary
December 4, 2000
34 Chambers Street
Princeton, New Jersey 08542
-9-
<PAGE>
APPENDIX A
----------
AUDIT COMMITTEE CHARTER
AVALON CAPITAL, INC.
ORGANIZATION
The members of the Audit Committee of the Board of Directors ("Directors") of
Avalon Capital, Inc., a closed-end registered investment company (the "Fund")
are selected by the full Board of Directors. The members of the Audit Committee
shall consist of not less than three persons (except as otherwise provided
below) who are not "interested persons" (as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended) of the Fund and who are
"independent" within the meaning of the audit committee rules of any securities
exchange on which the Fund's shares are listed for trading. Each member of the
Audit Committee shall be financially literate, as such qualification is
interpreted by the Board of Directors in its business judgment, or must become
financially literate within a reasonable period of time after his appointment to
the Audit Committee. At least one member of the Audit Committee must have
accounting or related financial management expertise, as the Board of Directors
interprets such qualification in its business judgment. In the event that the
Fund currently has less than three members on its Audit Committee it must have
three members not later than June 14, 2001.
STATEMENT OF POLICY
-------------------
The Fund's Audit Committee oversees the financial reporting process for the
Fund. The Fund's Board and its Audit Committee recognize that they are the
shareholders' representatives, that the auditors are ultimately accountable to
the Board of Directors and the Audit Committee and that the Board of Directors
and the Audit Committee have the authority and responsibility to select,
evaluate and, where appropriate, recommend to shareholders the selection or
replacement of the outside auditors.
The Fund's Audit Committee shall monitor the process for the Fund's valuation of
portfolio assets. This is key to providing shareholders and regulators adequate,
meaningful information for decision making. Members of the Fund's Audit
Committee must have a general understanding regarding the accounting process and
the control structure in place for the Fund. Open communication with management
and the independent auditors is essential.
This Charter shall be reviewed annually by the Board of the Fund.
RESPONSIBILITIES OF THE AUDIT COMMITTEE
---------------------------------------
In order to provide reasonable flexibility, the following listed Committee
responsibilities are described in broad terms:
o The Audit Committee's role is clearly one of oversight and review and not
of direct management of the audit process. The Fund's Board and Audit
Committee note that the outside auditors are ultimately accountable to the
Board and the Audit Committee.
o The Audit Committee members are responsible for a general understanding of
the Fund's accounting systems and controls.
o Committee members shall periodically evaluate the independent audit firm's
performance and the costs of its services. The Audit Committee will make
recommendations to the full Board of Directors regarding the selection of
the independent audit firm. The Committee shall request from the
independent auditors periodically a formal written statement (1)
delineating all relationships between the auditors and the Fund, its
investment adviser and their corporate affiliates and including
-1-
<PAGE>
disclosures regarding the auditors' independence required by Independence
Standards Board Standard No. 1, as may be modified or supplemented, and
(2) certifying that, in the view of the auditors, they are independent
public accountants with respect to the Fund within the meaning of the
Securities Act of 1933, as amended, and the applicable rules and
regulations thereunder. The Audit Committee is responsible for actively
engaging in a dialogue with the auditors with respect to any disclosed
relationships or services that may affect the objectivity and independence
of the auditors, and for recommending that the full Board take appropriate
steps, if any, in response to the auditors' response to satisfy itself of
the independence of the auditors.
o The Fund's Audit Committee is responsible for reviewing the scope of the
audit proposed by the Fund's independent auditors.
o The Fund's Audit Committee is responsible for recording minutes of its
meetings and reporting significant matters to the full Board of
Directors. The Audit Committee, shall meet no less frequently than
annually and receive information (as necessary) from, among others, the
Fund's investment advisor or its counsel and Fund counsel, in addition to
the auditors, in order to be informed about legal and accounting issues
having the possibility of affecting the financial reporting process. This
would include items of industry-wide importance and internal issues such
as litigation.
o The Fund's Audit Committee is responsible for (i) reviewing and
discussing with management and the auditors the Fund's audited financial
statements; and (ii) discussing with the auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, as may be
modified or supplemented. The Audit Committee shall confirm that the
independent auditors are satisfied with the disclosure and content of the
Fund's audited financial statements and shall advise the Board of
Directors with respect to its recommendation as to the inclusion of the
Fund's audited financial statements in its Annual Report to Shareholders.
o In reviewing the activities of the independent auditors, the Fund's Audit
Committee shall consider the auditors' comments with respect to the
appropriateness and adequacy of the Fund's accounting policies,
procedures and principles.
o The Audit Committee should take appropriate steps to keep apprised of
regulatory changes and new accounting pronouncements that affect net
asset value calculations and financial statement reporting requirements.
o The Fund's Audit Committee shall review and reassess the adequacy of this
Charter on an annual basis.
EFFECTIVE DATE
--------------
This Audit Committee Charter shall be effective as of September 1, 2000.
<PAGE>
PROXY - AVALON CAPITAL, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JANUARY 29, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned owner of Common Stock, par value $.001 per share (the "Common
Stock") of Avalon Capital, Inc. (the "Fund") hereby instructs DANIEL E. HUTNER
or NANCY W. HUTNER ("Proxies") to vote the shares of the Common Stock held by
him or her at the Annual Meeting of Shareholders of the Fund to be held at 10:00
a.m., (E.S.T.), on January 29, 2001 at the Equinox Hotel, 3567 Main Street,
Manchester Village, Vermont, 05254, and at any adjournment thereof, in the
manner directed below with respect to the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, and in the
Proxies' discretion, upon such other matters as may properly come before the
meeting or any adjournment thereof.
<TABLE>
<CAPTION>
[X] PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE. FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Election of Directors: [ ] [ ] [ ]
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):_____________________
Nominee(s) : DANIEL E. HUTNER
DONALD SMITH
2. Ratification of the selection of Deloitte & Touche LLP
as the Fund's independent accountants. [ ] [ ] [ ]
3. In their discretion to act upon such other matters
as may properly come before the Annual Meeting
or any adjournment thereof. [ ] [ ] [ ]
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN
FAVOR OF THE ABOVE PROPOSALS.
Your proxy is important to assure a quorum at the Annual Meeting whether or not
you plan to attend the Meeting in person. You may revoke this proxy at any time,
and the giving of it will not effect your right to attend the Annual Meeting and
vote in person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S)_________________________DATE_____________
_________________________DATE_____________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS. WHEN SHARES ARE HELD AS JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER AND IF A
PARTNERSHIP, PLEASE SIGN IN THE PARTNERSHIP NAME BY AUTHORIZED PERSON.
